Bad Credit Mortgage: No More Fears

robin@mortgagefit.com (Lance Williams) — Thu, 18 Aug 2005 22:18:40 GMT

by Lance Williams
Thursday, August 18, 2005

Gone are the days when you had a credit score as less as 600 and you could not even dream of getting a mortgage. But today times have changed and for the better.

Imperfect credit scores are no proof of a person's credit worthiness. Bad financial times can happen at any time and with anybody. For this one cannot stop anyone from getting a house.Bad Credit Mortgages come in various forms.

� Sub-prime loans
� B, C, D, E loans
� No-documentation loans
� Credit-challenged loans, etc.

It was considered degrading to opt for a bad credit mortgage earlier and there were certain factors which made borrowers to this concept as well.

There are many myths associated with bad credit loans.

Firstly, the interest rates are sky high. Actually today the rates have become affordable. But then they are comparatively higher than the conventional mortgages. After all you are credit risk to the lender.

Secondly, too many points are charged. This is absolutely false, as people with credit scores as low as 580 are getting loans with no points upfront. Some mortgage brokers charge five to ten points extra , but all of them do not reach the lenders .The mortgage brokers sometimes pocket some amount of it .You should bear in mind that if the amount borrowed is less ,even ten points is very less an amount.

Thirdly, might require a huge down payment. It depends on the lender who is processing your loan. You might very well get a lender who will write the loan for you with just 20% down or even less. The underwriting guidelines for sub-prime loans are expanding to cover more people.

Lastly, will not be avail of a cash-out. In case of a home purchase chances are one in a hundred say. But if your aim is to refinance, then you can get through.

Opportunities with a bad credit mortgage

With a bad credit mortgage you get an opportunity to clean up your bad credit. Even if you have filed for bankruptcy, you can still get a mortgage and at an affordable price too. The interest rates can be limited to suit your present financial condition by introducing a rate lock. Some lenders even give you an opportunity to finance 100% without any down payment.

With sub-prime loans being processed by the lenders who write A- paper loans and the Alt-A market really coming up; more and more people with a flawed credit can get respite .After all a person with a stellar credit too can encounter such a situation whence he/she can go bankrupt. So, the industry is adjusting its policies keeping in mind the future mortgage borrowers.

About the Author

Lance Williams is an accomplished writer specializing inmortgage and real estate and currently contributing to Mortgagefit.

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